/ TAG Central Banks

Many leading central bankers now argue that, instead of just playing its traditional role of deciding the allocation of government spending, investment, taxes, and transfers, fiscal policy must substitute for monetary policy in economic fine-tuning and fighting recession. That would be a big mistake.

It doesn’t take much to spark corrections in vulnerable economies and markets, and big shocks to highly vulnerable systems are a recipe for crisis. That’s why the vulnerability of today’s global economy—reflected in real economies, financial asset prices and misguided monetary policy—needs to be taken seriously.

Lawrence H. Summers and Anna Stansbury uncover why this year’s meeting of central bankers may encourage an insular–and dangerous–complacency.

Mohamed El-Erian explains why central banks’ large policy wager might not pay off in the end.